National Electric Power Regulatory Authority (Nepra) has reserved determination on a multi year tariff petition of Faisalabad Electric Supply Company (Fesco). The power Distribution Company (Disco) which is under active privatisation plan has proposed an increase in tariff from Re 1 to Rs 4.91 per cent and Rs 0.58 per unit in the second year whereas for next three years Rs 0.06 to Rs 0.17 per unit hike has been recommended.
During the public hearing on Monday, Fesco officials revealed that the company paid additional Rs 13 billion to the Central Power Purchasing Agency (CPPA). The Chairman Nepra expressed his displeasure with Fesco officials for the payment saying that the company is being privatised, and questioned as to how the amount will be recovered.
He further stated that Fesco's system is obsolete but the company is recovering charges from consumers under the guise of operation and maintenance. The Chairman Nepra further stated that the government should ensure elimination of subsidy after the privatisation of Fesco. According to the petition filed by Fesco the company will make an investment of Rs 56.5 billion in the next five fiscal years to improve its network. It plans to increase the average power tariff from Rs 12.20 per unit in FY2015-16 to Rs 13.17 per unit in FY 2019-20. The company plans to reduce its line losses from the current 10.90 percent to 9.98 percent within next five years. The company plans to increase its distribution margin from Rs 1.93 per kWh to Rs 2.11 per kWh in next five years.
The petition says that it has been prepared with the assistance of financial advisors hired for the privatisation of the company. The Fesco also revealed that it will have to hire more than 3,000 staff to smooth its operations before privatisation. Multi-year tariff is being introduced in accordance with IMF, World Bank and Asian Development Bank. Nepra's tariff section has raised 29 questions which were replied by the Fesco officials.
According to Nepra's website, the regulator asked whether the petitioner reference return on regulatory asset based on projected rate of return of 18.91 percent for FY 2015-16 is justified for future adjustments till FY 2019-20? Whether the load demand forecast provided by Fesco is justified? Whether the base line conditions identified by the Fesco in its five years investment plans truly reflective of its prevailing performance and conditions? How Fesco will ensure timely implementation and completion of the committed projects identified under its investment plans? Whether Fesco has arranged the funds required to undertake these projects? Whether the generation addition by setting up new IPPs, as provided by Fesco, are consistent with the generation expansion plans of NTDC in next five years? Fesco is required to submit year wise rationale in respect of cost-benefits through investing the above-mentioned amount and improvement in its existing networks such as improvement in HT/LT ratios and average length per 11kV feeder and Fesco needs to provide details by linking it to historical data.
Fesco showed cumulative savings in terms of reduction in power losses as 18.8 MW, energy savings as 91.05GWh and a cumulative decrease of 1.16 percent in projected losses over next five years. Nepra will also hold public hearing of USAID drafted multi-year tariff petitions of Mepco and Pesco next month.
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